Japan Reaffirms Economic Commitment to South Africa

Following a trade conference involving political and business leaders from both nations, Japan this week vowed to continue to support the struggling South African economy. The South African economy has been dealing with internal problems after a highly unexpected contraction by 1.3% of total GDP in this year’s second quarter. Despite being Africa’s most developed economy, jobs are scarce in South Africa, which carries an estimated 25.2% unemployment rate. High unemployment combined with already low wages have caused a severe decrease in domestic consumer spending. The Japanese plan proposed this week hopes to begin to put upward pressure on both job creation and wages via a program of career training and Japanese capital investment.

The first and most important part of the development assistance plan offered by Japan is its proposal of training South African students in various engineering fields. The program will begin modestly, with an estimated 100 students receiving specialized training in Japan by the end of next year. It is likely, however, that more students will be given such an opportunity if the program is generally seen as a success. This training is aimed at providing employees suitable to highly skilled positions within the developing South African economy. Larger versions of the program in the future could help to grow the country’s middle class and increase domestic spending by placing upward pressure on wages.

In tandem with this training program, Japan has also encouraged businesses to invest in South Africa, which is in need of substantial infrastructure updates. Sachio Kaneki, current chairman of the Japanese Chamber of Commerce and Industries in South Africa, has identified water, electrical, and transportation infrastructure as the key areas where Japanese investment should be focused in order to best help the developing South African economy. Aging infrastructure has presented a severe challenge for businesses, particularly in the power sector. According to some estimates, the cost of electricity nearly tripled in the 6 years between 2008 and 2014, an increase mostly attributed to an outdated power grid. Mr. Kaneki also spoke of the need for better education and the creation of more jobs for sustained success in South Africa.

Like many developing economies, South Africa has been dealt a substantial blow as a result of the recent economic slowdown in China. Drops in commodity prices as well as uncertain currency markets have made it difficult to bring in foreign investment at a time when investors around the world are wary of speculative ventures. In the case of South Africa, however, the prospect of Japanese investment may be enough to pull the economy out of its slump. This is particularly true because of a long standing trade relationship between the two nations which makes aiding in the long term sustainable growth of the economy in South Africa beneficial to both investors and the Japanese government.